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Saturday, May 24, 2014

Weekly Investment Term #4

Well I was really busy lately and that's why the failure to maintain the update on this even though I believe it is important. In the world of financial and investment, it is best that we learn the language right.

Anyway, today I'm gonna share a key part of investment, in strategy and planning on the suitable investment plan for oneself, it is first important for us to find out about ASSET ALLOCATION.

Asset allocation

In one of the dictionary, asset allocation is defined as a financial strategy for reducing risk in an investment portfolio in order to maximize return. So how do you really reduce risk and maximize the return in your portfolio? Asset allocation aims to balance risk and reward by apportioning a portfolio's assets according to an individual's goals, risk tolerance and investment horizon. 

Depending on the amount of your investment, it is important to look at the few key investment types...equities, fixed-income, and cash and equivalents - have different levels of risk and return, so each will behave differently over time. If you need your cash flow to be liquid, it may not be appropriate to put into fixed income or maybe equity. Investment like real asset should also be considered in proportioning the amount of your investment in each of these different asset types.

There is no easy way to find the best return at the lowest risk but in asset allocation, where it is commonly used among professionals, where the selection of individual securities is secondary to the way you allocate your investment in stocks, bonds, and cash and equivalents, which will be the principal determinants of your investment results.

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